Facebook Places Multiple Bets to Win Messenger Wars

June 12 (Bloomberg) -- Facebook Inc. is adopting a
multifront strategy to woo fickle smartphone users who crave a
variety of ways to send messages to friends.

The social network has made two big moves in messaging in
just the past five months. In February, Facebook agreed to buy
startup WhatsApp Inc. for $19 billion. This week, it followed up
by recruiting EBay Inc.’s PayPal President David Marcus to run
its other messaging efforts including Messenger, which Facebook
started requiring people to use for messaging in April.

In an age when e-mail is losing its cachet, especially
among the young, Messenger and WhatsApp provide Facebook with
different ways into messaging. WhatsApp, which is more popular
in Europe and Asia, looks spare and will remain simple, its
founders have said. By contrast, Messenger, which has virtual
stickers of smiling pandas and other features, may keep
expanding on what it offers. Marcus will have the freedom to
experiment and try different things with Messenger to
differentiate the app, said a person familiar with the matter,
who asked not to be identified because the plans are private.

The two apps show how it takes more than one strategy to
win in the mobile-messaging market. With twin apps, Facebook can
set itself apart from competing programs including Tencent
Holdings Ltd.’s WeChat and Naver Corp.’s Line, which are also
making a land grab for consumers and messaging revenue. The
services have attracted more than 1 billion users in less than
five years, according to a presentation from venture capital
firm Kleiner Perkins Caufield & Byers last month.

Twin Fronts

“It seems like Facebook is going to have two very
different approaches,” said Scott Kessler, an analyst at S&P
Capital IQ. “Facebook acquired WhatsApp because they’re
successful and should continue doing what they’re doing. For
Messenger, there’s a lot of opportunity for experimentation and
for new ways of monetization.”

Facebook is opening new fronts in mobile messaging after
playing catch-up to the rise of the apps, which have threatened
to snatch consumer attention away from the social network.
Marcus, who will report to Chief Executive Officer Mark
Zuckerberg and Javier Olivan, has a mandate to eventually find a
business model for Messenger, said the person familiar with the
matter. Messenger doesn’t make any revenue.

Zuckerberg has said he sees Facebook growing by catering to
different-sized groups through various forms of communication.
Facebook is working on new experimental apps to bolster that
vision, including Slingshot, an application for sharing
disappearing moments with groups.

A Facebook representative declined to comment.

Bear Stickers

Marcus will have a wealth of ideas from rivals to study for
how to grow users and make money off Messenger. In Korea,
KakaoTalk distributes and makes money off games in its messaging
app. The games have the benefits of piquing user interest and
generating revenue. Cumulative sales from gaming have surpassed
$1 billion, split between publishers and Kakao, the company said
last month.

In China, Tencent’s WeChat lets users choose and pay for
stickers -- like a bear with roses -- that they can send to one
another through the app. People can also use WeChat to pay for
goods with their phones and hail taxis.

TangoMe Inc., which was valued earlier this year at more
than $1 billion in a funding round led by Alibaba Group Holding
Ltd., said this week that it is increasing its utility by
letting users distribute music, videos and articles to others on
its messaging platform. Brands can create a channel on Tango for
free and the app will share revenue from ads that are clicked on
within a channel.

No Gimmicks

“This is part of a larger underlying trend of messaging
services expanding beyond communication services, and help the
best things get distributed,” Tango co-founder Eric Setton said
in an interview. Tango made the deals with media companies
because they were looking to go where their audience was going -
- to the apps that have increasingly taken the place of SMS
messaging, he said.

All of this contrasts with WhatsApp, which has no stickers,
taxi-hailing capability or advertising. The app, with more than
half a billion members worldwide, charges $1 a year for usage
after the first year, and has kept its no-frills service. It
follows a motto of no ads, no games and no gimmicks.

Facebook’s Zuckerberg and Chief Operating Officer Sheryl
Sandberg have told WhatsApp’s founders to just focus on growth
and engagement, co-founder Brian Acton said at a technology
incubator event last week.